Agricultural News

Expect Muted Feedlot Demand this Spring as Result of Limited Run on Wheat Pastures Over Winter

Mon, 05 Mar 2018 12:19:51 CST

Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel explains what effects a limited run on wheat pasture this month may have on feedlot demand and cattle markets this spring.

"For dual-purpose wheat production, First Hollow Stem (FHS) is the physiological signal in the wheat plant to remove cattle in order to preserve the wheat grain yield potential. In Oklahoma, the average date of FHS varies from year to year, by location and wheat variety but typically occurs from late February to mid-March. Because FHS represents a rigid deadline for termination of wheat grazing, a pronounced run of feeder cattle is often observed in Oklahoma auctions in March.

"Increasingly dry conditions since last fall resulted in much less wheat pasture than normal in Oklahoma. Much of the wheat was delayed in germination or simply didnít grow much due to drought. Fewer stockers were placed on wheat than normal and many of those that did graze were forced to move off wheat early due to lack of forage. The January Cattle report included an estimate of 1.5 million head of cattle grazing small grains pasture in Kansas, Oklahoma and Texas. This was down 17 percent from one year ago. More cattle have moved off wheat pasture since the beginning of the year. Oklahoma combined auction total volume was up 14.8 percent the first six full weeks of 2018. However, in the last two weeks of February, the combined auction volume was down 31.1 percent from the same period last year. It appears that relatively few stockers remain to be marketed in March.

"Last fall, a number of wheat producers indicated intentions to graze out wheat due to dismal wheat prices. However, with much of the winter wheat belt firmly in the grip of drought and few stockers remaining on pasture, little wheat grazeout is likely this year. Unless it rains soon, wheat production prospects will decrease sharply and it is increasingly likely that wheat producers will terminate wheat and switch to a summer crop. Even if the wheat receives rain and begins to grow it is unlikely that many producers will purchase new stockers for grazeout.

"Many of the stocker cattle that were or would have been on wheat pasture this winter are already in feedlots as evidenced by the large placements the last few months. Strong feedlot demand has kept stocker and feeder prices firm this winter. Oklahoma feeder cattle prices have followed seasonal patterns in January and February with calf and stocker prices increasing slightly while heavy feeder prices were steady to slightly lower seasonally. Feeder cattle seasonal prices differ by weight with lightweight feeder prices typically peaking in March and heavyweight feeders increasing from a February low heading towards a summer peak. In general, there is no reason to expect feeder markets not to follow seasonal tendencies. While there may be relatively fewer feeder cattle marketed in the March to May period, feedlot demand is likely to be somewhat muted as feedlots are quite full until some cattle are marketed. Thus, the overall demand/supply balance likely has not changed a great deal for the spring period."